Key takeaways

  • Crowdfunding has experienced exponential growth in recent years.
  • Large enterprises are now joining such platforms.
  • Enterprise crowdfunding is seen as an opportunity for product development and brand awareness.

 

Over the past five years, crowdfunding has exploded. Dying are the days where the destiny of your world-changing project-to-be rested solely on the delivery of your elevator pitch. With its exponential growth reaching an estimated volume of around $34.4 billion worldwide in funds raised for 2015, crowdfunding is now predicted to overtake total VC industry investment in 2016.

Enterprise crowdfunding:
more than just dollars

This year, crowdfunding is moving beyond its original mandate of helping ordinary entrepreneurs realise their dreams and into its next phase: crowdfunding for major corporations.

Launched earlier this year by popular crowdfunding site Indiegogo, Enterprise Crowdfunding is directed at the big end of town, but it’s less about funding than its moniker implies. Instead, the platform – aimed at Fortune 1000 and Global 500 companies – is about leveraging one of crowdfunding’s numerous corollary benefits; namely, customer feedback.

According to Indiegogo, the benefits also include:

  • Building brand awareness through meaningful customer engagement.
  • Turning market research from a cost into an opportunity for pre-sales and customer acquisition.

That’s because large and small enterprises alike suffer the same predicament: not knowing in advance whether a new product will take the market by storm or fail dismally. This has been one of the primary benefits of the crowdfunding model; by its very nature, it provides an accurate index into the interest that a new product is likely to attract.

In the crowdfunding space, popular projects don’t just start out with fistfuls of cash – skilful campaigners can drum up significant mindshare, too. Before they even finalise their first product, many have already amassed a legion of lightly-invested well-wishers.

That’s what big business wants in on. Toy maker Hasbro has already used crowdfunding to source a new card game concept, JBL headphone manufacturer Harman International Industries has announced a campaign to develop ‘audio augmented reality technology’, while GE and Local Motors’ innovation subsidiary FirstBuild has already completed two rounds since Indiegogo’s new service inception in January 2016. All this suggests enterprise crowdfunding itself is going to have all the traction it needs to become the Next Big Thing.

The criticisms
of crowdfunding…

Despite being almost universally adored, the concept of crowdfunding as a whole does have its detractors. Typically, critics advance the ease with which spurious or otherwise poorly-conceived vanity projects could muscle out the really valuable innovations.

They argue that, before the days of PC-based peddling, a project couldn’t come to life without having to make a convincing case to angel investors or venture capitalists. At the very least, having to raise startup capital singlehandedly might provide time to pause and consider whether the idea really is worth it.

It’s also held that the pure spirit of crowdfunding (generally speaking, to fund projects that appeal to the community) shouldn’t be tainted by big enterprise. Furthermore, if these projects had real merit, so goes the claim, they’d be able to start, survive and thrive via the normal channels.

…are
mostly misguided

However, this misses the point. Many projects might only enjoy ‘niche’ appeal; but, worldwide, those cracks are more like yawning chasms.

One of the biggest roadblocks for startups in manufacturing is scaling up production. In the past, the gap between farmers’ market and mass market could take years to surmount. Time better spent refining the product (or dreaming up new ones) than hawking it door-to-door.

Plus, many potential investors might care little about changing the world and would rather simply help, in some way, another individual pursuing their dream.

For enterprise,
the case is compelling

While enterprise crowdfunding is already a shoo-in to trend prominently, the case for it can be strengthened still. As marketing teams become accustomed to establishing positive popular sentiment before entering development phase, we might see crowdfunding serving to bridge the communications gap between corporations and their customers.

That’s because pure profit isn’t usually your everyday crowdfunding investor’s guiding motivation. Unless they’re shareholders, they’re unlikely to care about your bottom line. As such, it seems likely that enterprise crowdfunding will urge businesses towards better corporate responsibility, for example by improving their diligence in ensuring an ethical and environmentally-observant supply chain. Any negative press – say, regarding employee mistreatment or excessive tax avoidance – could be disastrous for such a campaign and will need to be resolved or, ideally, avoided altogether before a corporation can expect vigorous buy-in.

It feels almost too good to hope for, but it does seem likely that the real disruptive effect of enterprise crowdfunding will be to communicate the fully-fleshed out reality of what the public truly desires.

Disruption
at its purest

So called ‘disruptive’ technologies are exactly those that challenge the established order, and the companies that control these markets would naturally resist any challenge to their dominance.

That’s the blind spot that crowdfunding can open our eyes to. The question is, will corporates do it properly and transparently? PwC’s Head of Innovation, Kate Eriksson, emphasised that this really is a ‘wait and see’ situation:

“A technology is disruptive when it creates new value; disintermediates a person, organisation or step in the process; and can offer it at scale. Crowd is so compelling because it embodies the salient traits of all three of these factors.

The questions coming up will be: what were the actual results of the crowd feedback? Who analysed their input and how? What’s been built or changed? It’s these subtle but important factors that I think we’ll need to be diligent in measuring in the months ahead.”

Without transparency, a deceptive campaign could be used to create a false consensus about a product’s desirability, a practice that would almost certainly erode crowdfunding’s legitimacy.

A delicate balance
for crowdfunding

However, getting all that good stuff will require some restraint. Crowdfunding’s good name hinges on its reputation for being an enabler of the underdog. If the space becomes overrun by wealthy and powerful corporate entities attempting to crowdsource every marketing decision, so may be sown the seeds of cynicism.

The potential insights to be gained from enterprise crowdfunding and its capacity to deepen the connection between corporations and customers is exciting, but will require sincerity and care to ensure that this particular boon enjoys the longevity it deserves.